The Growth Of Government

As the 20th century has progressed, the public has come to expect
the government to provide more services than in any previous era.
It might be added that a greater number of services becomes
economically feasible for the government to provide when large
numbers of people are crowded into cities. For example, organized
collection of trash would be prohibitively expensive in rural
areas because of the dispersed population, but it is practical --
and necessary -- in big cities.

The rate of growth of government has been greater at state and
local levels than at the federal level. From 1960 to 1990, state
and local governments increased their employees from 6.4 million
to 15.2 million, while the number of federal employees rose only
from 2.4 million to 3 million.

Partly because of this growth, and the rising costs of taxes to
pay for it, toward the end of the 20th century many thoughtful
observers were questioning whether government was the most
efficient provider of needed services. In fact, a new
word -- "privatization" -- was coined and quickly gained
acceptance worldwide to describe the practice of government
turning over to the private sector some of its functions, which
in the United States (because so little economic activity is
directly under the control of the federal government) has meant
primarily at the municipal and regional level. By 1991, such
major U.S. cities as New York; Los Angeles, California;
Philadelphia, Pennsylvania; Dallas, Texas; and Phoenix, Arizona
had employed private companies or nonprofit organizations to
perform a wide variety of activities previously performed by the
municipalities themselves, ranging from street-light repair to
solid waste disposal and from data-processing to management of
local golf courses. With a projected 1991 budget deficit of $3.5
thousand-million, New York City, the largest U.S. city, was under
particularly heavy pressure to privatize; it had already
contracted out some $5 thousand-million of city services, and was
seriously considering contracting out still more.

In fact, some American politicians and analysts have argued that
the federal government should privatize such major activities as
the U.S. Postal Service.

Yet, in the 1990s, privatization of public services remains a
highly controversial subject. While advocates insist that
privatization reduces costs and increases public-sector
productivity, others argue the opposite, that private contractors
need to make a profit and thus cost more, while not necessarily
being more productive. The difficulty in measuring the
effectiveness of a social service that has been privatized is one
problem. If only one private contractor bids on a social service,
there may be no cost saving. Public-sector unions, not
surprisingly, are adamantly opposed to most privatization. They
point out that there have been cases where private contractors
submitted very low bids in order to win contracts, but later
raised prices substantially.

The crucial element in privatization questions is not just who
provides the service, but whether there is an element of
competition present. In a privatization, this usually means there
must be more than one bidder before a contract is awarded. And
sometimes with the spur of threatened privatization, local
government workers may become more efficient in order to hang
onto their jobs.

Clearly, more than 200 years after the United States achieved
independence, the question of what the proper role of government
in the economy should be remained a highly debatable one.